How to calculate compound growth rate

Compound growth rate is a measure used in finance to calculate the growth of an investment over multiple periods, taking into account the effect of compounding. Compounding is the process where the earnings on an investment are reinvested, leading to exponential growth over time. To calculate the compound growth rate, the following formula can be used: Compound Growth Rate = (Ending Value / Beginning Value) ^ (1/n) - 1 Where: - Ending Value is the value of the investment at the end of the period - Beginning Value is the initial value of the investment at the beginning of the period - n is the number of periods over which the investment has grown To use the formula, simply substitute the values into the formula and solve for the compound growth rate. For example, if an investment grows from $1,000 to $1,500 over 5 years, the formula would be: Compound Growth Rate = (1500 / 1000) ^ (1/5) - 1 = (1.5) ^ (0.2) - 1 = 1.095 - 1 = 0.095 or 9.5% This means that the compound growth rate of the investment over the 5-year period is 9.5%. It's important to note that the compound growth rate takes into account the effect of compounding, which can significantly increase the growth of an investment over time. This makes it a useful measure for evaluating the performance of investments and comparing different investment opportunities.